Waitress rather than take out a loan: fewer students in debt

The number of student loan agreements signed in 2016 dropped significantly compared to previous years, to 44,000. Although all of the loans investigated in the Student Loan Test 2017 were assessed as being reliable, experts recommend exercising caution. This is particularly the case with new private loans that call themselves “student loans” – these offer much poorer conditions.

Student loans or education funds may be useful when students are unable to fully finance their studies with a grant (BAföG), scholarship or part-time job. The demand for such offers has fallen sharply. This is the outcome of a survey conducted within the annual CHE Student Loan Test. The number of newly concluded student loan agreements fell by one quarter between 2014 and 2016, from 60,000 to 44,000. The two market leaders, the KfW Student Loan and the Federal Office of Administration’s Education Loan, are affected most.

“Reasons for the decrease in student loans could be that students have greater flexibility in terms of time to finance their studies with a part-time job – along the lines of ‘waitress rather than take out a loan’,” summarised Ulrich Müller, Head of Policy Studies at the CHE Centre for Higher Education. “The good news in this respect,” stated Müller, “is that today, fewer students in Germany get into debt, and if they do incur debts, it is not by chance, but after careful consideration.” This is reflected in the average amount of credit taken out. In the case of the market leader, the KfW Student Loan, the average amount of credit taken out was €527, which is far less than the maximum available amount of €650.

The results of the CHE Student Loan Test 2017 show that all of the loans on offer in Germany are reliable and well designed. Many of the 43 student loans and education funds tested gained top marks in several of the five assessment categories (access, volume, costs, risk mitigation and flexibility).

Even so, CHE expert Müller advises students to carefully scrutinise new innovative student funding options. One example is peer-to-peer or crowdfunding loans, which were not assessed in the CHE Student Loan Test. Such loans are not offered by a bank, but via a web portal run by one or more private individuals. “Despite being called ‘student loans’, some such loans are offered at horrendous interest rates exceeding 10 per cent, which has nothing to do with meeting students’ needs,” Müller warned. “Proper” student loans, for example, never pay out the whole sum in one go, but in monthly instalments.

Another way of recognising a good, reliable offer is when the repayment conditions are known at the time of taking out the loan. This was not the case with all of the student loans tested. “The interest rate for repayment is one of the decisive factors of a credit agreement,” stated Müller. “Before taking out a loan, students should insist that the interest rate is clarified and fixed at the time of signing the contract, in light of the current low-interest phase.”

About the CHE-Student Loan Test:
The CHE Student Loan Test 2017, developed in collaboration with the Handelsblatt newspaper, was published this year for the twelfth time. Using 21 criteria, it assesses the advantages and disadvantages of 43 student loans that are currently on offer. This year’s CHE Student Loan Test also included an annex covering 18 regional HEI-specific offers for the first time. The test is based on information given by the loan providers. The wide range of detailed information provided in the publication gives students and prospective students a transparent overview of the market. In addition, tables can be used by students to calculate their individual requirements. The CHE Student Loan Test is freely available at www.che-studienkredit-test.de.